Although the institutional processing of financial documents has now become highly automated, a great deal of handling by staff personnel is still required. The basic considerations of honesty and accuracy are always of paramount importance. In addition, speed and cost factors may be critical to an institution's competitive position within the industry.
Each branch of a bank or similar institution typically handles thousands of transactions every day. Among the most common transactions are the cashing of checks written on the same bank, the cashing of checks written on other banks, deposits without cash back, and deposits with cash back. At least a dozen other transactions are also quite commonplace.
Clearing house procedures have been greatly simplified by use of magnetic ink codings of the type shown in U.S. Pat. No. 3,000,000. The Magnetic Ink Character Recognition Code--known in the industry as MICR--has become a standard vehicle that expedites not only the clearing of checks through the Federal Reserve Bank between different banking institutions, but also the clearing within individual banking institutions of transactions between their different branches. Magnetic ink characters that identify both a particular bank and a particular customer's account number are generally pre-printed on each check and deposit slip before they are furnished to the customer. It is an industry standard to place the MICR that identifies the banking institution on the lower left of the front face of the check, while the MICR identifying the customer's account number is placed in the lower center.
When the customer later writes a check, he or she writes the dollar amount of the transaction on the face of the check in ordinary numerals, i.e., the commonly used arabic numerals. Whether these numerals are written in pen or ink, or typed with a typewriter, they have no magnetic characteristics and hence cannot be identified by the same sensing devices that sense the MICR coding. The machines used to clear the checks operate only in response to the MICR code. It is therefore an industry practice to use a MICR encoding machine to print on each check in magnetic ink the dollar amount for which that check has been written. According to the industry standard this MICR coding of the dollar amount is placed on the lower right of the face of the check, on a common line with the other pre-printed MICR codes.
At many of the major banks today, each teller has his or her own supply of cash, and will transfer a batch of checks several times a day to an operations officer. The teller starts the day with a certain amount of cash and enters his opening cash balance on his own computer (often his own terminal of the bank's computer network). Upon transferring a batch of checks, the teller uses an electronically operated machine to create a Batch Report which includes a tape list and total for that batch, and then gives it to the operations officer along with the batch of checks. When the teller needs more cash, he or she obtains more from the vault, is charged with that amount, and adds that amount to the computer total. At the end of the day, after closing, the teller adds starting cash plus all cash "bought" from the vault, subtracts the sum of all batches traded out during the day, and the balance must then equal the amount of cash in the drawer. If these amounts do not balance, the operations staff generally have the responsibility of locating and correcting the errors.
It is a general practice in all but the smallest banking institutions to process all checks and other documents evidencing the day's transactions through a proofing center. Such centers are often located somewhere other than in the office where the bank deals with its customers. The proofing function may involve a number of account-balancing and error-detecting procedures. It is generally at the proofing center that the dollar amount of the transaction is keyed into a MICR encoding machine and printed onto the lower right corner of the face of the check.
In some instances a customer may need to cash a check or make a deposit, but does not have a pre-printed form with him at the time. It is then necessary to use a blank form of check or deposit slip, and to write the account number on it. Many bank offices are equipped with a MICR encoding machine in order to expedite this process. The teller then keys into the machine the customer's account number which the machine prints in magnetic ink onto the check or deposit form.
MICR encoding machines are both too bulky and too expensive to be positioned at every teller station, however, hence at the present time some bank offices are not equipped with even one such machine.
It is always of interest to the banking industry to find new procedures which will increase speed and efficiency, decrease error rates, and at the same time maintain the necessary managerial checks against dishonesty of customers or employees.